Minnesota business owners share struggles, successes when hiring in a labor shortage

Through the past four years, owner Karen Firle has struggled to hire and retain employees at her automation components wholesale business in Savage.

Whether in six months or a year, workers eventually leave her Universal Power Conversion in search of higher-paying jobs with wages she can't match.

"It's always somebody waving the bigger dollar," she said.

The attrition rate left Firle in a constant state of hiring. Meanwhile, she's the one picking up the slack for lost labor.

Small-business owners like Firle said for the past two years or so, it's been a job seekers' market. That means it has been a challenge to fill needed positions, a troubling trend for a segment of firms that employs about half the state's workers. Minnesota's unemployment rate is at 3.1%, so qualified workers are in short supply, even more than at the national level, where the rate is 3.7%. Per the U.S. Chamber of Commerce, Minnesota has about 51 available workers for every 100 open jobs.

The labor shortage has forced Minnesota small-business owners to make concessions to find the help they need. Here, local employers talk about the struggles they have faced and how they have adjusted amid the enduring labor challenge.

"When you're a small business, it really does hit your bottom line hard," Firle said.

Steep learning curves

Firle said she has an additional challenge in finding workers given the steep learning curve to fully understand her company's operations.

She needs workers with a multitude of skill sets, from sales and shipping to basic customer service. She also needs people proficient in inventory management, Microsoft Excel and accounting software system QuickBooks. When Firle placed an ad for a job six months ago, she said most of the 30 applicants had a resume filled with jobs they hadn't stayed in for more than a year.

"People aren't profitable until they're at least a year in," she said.

Evaporating talent pool

Kathy Eskelson, owner of Anoka Massage and Pain Therapy, said that in nearly two decades in the massage therapy business, she has never seen the selection of quality job candidates so low.

Minnesota schools that train the next wave of massage therapists have closed in recent years, including the Minneapolis School of Massage and Bodyworks, the Minnesota School of Business and CenterPoint Massage and Shiatsu School & Clinic.

Coupled with COVID-19 disrupting the in-person nature of the business, many massage therapists either retired or transitioned into other fields of work, further depleting the talent pool for businesses like Anoka Massage and Pain Therapy, Eskelson said.

"One of my biggest concerns is sustainability," she said, "just having enough massage therapists to meet the demand from the public, because the demand is out there."

Typically, Eskelson's therapists are booked out four to six weeks. To make room for new appointments, she needs more therapists on staff. At her 6,000-square-foot business in downtown Anoka, which includes a wellness shop, Eskelson employs about a dozen people.

Recently, she has hired beginners directly out of Anoka-Ramsey Community College. Given their inexperience, though, her managers have to provide additional training, which means managers have less time to cater to clients, which ultimately impacts the bottom line.

It's a sacrifice Eskelson is willing to — and has to — accept in order for her business to grow, she said. "It's the cost of hiring someone," she said.

A gap in expectations

Roseline Friedrich, owner of Roseline's Candles, said the pandemic has significantly affected people's attitudes toward work, especially those of the younger generation taking on entry-level jobs.

In the past few years, she said she's experienced her share of entry-level candidates with little to no work history that fall short of matching her work ethic.

"My expectations for them are way higher than what they would probably get at Target, Walmart or Amazon working for the same amount of money," she said. "If you don't want to grow and learn and do better every day, this is probably not the place for you."

The idea of working alongside the founder of a small business has become a bit romanticized, Friedrich said, meaning workers can mistakenly blur the lines between friend and boss in a compact work environment. As a small-business owner, Friedrich has to wear many hats and expects her employees to do the same.

When that fails to happen, it slows production. Like many small-business owners, Friedrich doesn't have a rainy-day fund to cover lost production when new hires don't perform or quit unexpectedly.

"I can literally feel the impact of their laziness," she said. "My bank account feels it."

Friedrich opened a storefront in northeast Minneapolis in 2021, and this month will open her new store on St. Paul's Grand Avenue that's twice the square footage.

Friedrich typically staffs from five to seven employees throughout the year but will add more at her new location. Given her previous success hiring college students, she'll do the same in St. Paul, where she hopes to pull from institutions like Macalester College and St. Thomas University.

Adjusting the business model

Mike and Ashley Maharas were anticipating a banner year in 2021 for their Delano-based window-washing and exterior-cleaning business, Wash Masters.

But when it came time to hire seasonal workers, no one applied.

"We were starting at $18 an hour and couldn't get anybody to work for us," Mike Maharas said.

After struggling most of that year, they took the advice of a business coach in 2022 and switched to a four-day workweek schedule. The Maharases also converted to a performance-based pay scale, where workers can maximize compensation by completing the most amount of work in the least amount of time.

The number of applicants ballooned, and with enough staff to fulfill service requests, sales skyrocketed.

"It became so painfully clear that the pandemic brought people closer to their fundamental needs as humans and need to have balance in our lives," Mike Maharas said.

Beyond the Maharases, Wash Masters has just one other year-round employee. But at the height of seasonal work, the business will employ as many as 13. That time period extends from April to the end of November, which includes newly added Christmas light-installation service.

Maharas said he's received feedback from employees that has affirmed he made the right decision by adjusting the pay scale and work schedule.

"They felt valued," he said. "They felt like they had opportunities to live their life and be compensated for the work they do."